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JDEDZ PROJECT REVIEW SEPTEMBER 2017 IV: IMPACT ON PLEASANTON RETAIL MARKET This final review seeks to place the proposed JDEDZ retail developments in the context of the Pleasanton retail market. We focus, as above, on the Costco store, as it is the driver of most of retail sales at the site and of the need to invest substantially in transportation infrastructure to serve the site. The city previously commissioned ALH Urban & Regional Economics prepare an Economic Impact Study of the JDEDZ, which included a market study component. Given the tight time frame of our work, Civic Economics has limited this phase to a review of the ALH study to ascertain whether its methodology and findings are sound with respect to this specific project. ALH forecasts that Costco and other JDEDZ retailers will not substantially impact other Pleasanton retailers, concluding that the development is almost entirely additive to the local market and thus to municipal sales tax collections. This conclusion leads to the finding that the proposal will not contribute to urban decay, as defined in California law. However, two aspects of that analysis strike us as problematic: (1) It overestimates household consumer demand today and into the future by including irrelevant segments in the analysis and (2) it ignores current retail trends. Consumer Demand Estimates are Overstated ALH systematically overestimates household demand for relevant retail goods. ALH builds its local market analysis on the assumption that Pleasanton residents spend 25% of household income on retail goods, a figure derived from three sources: the Census Bureau's Consumer Expenditure Survey for spending patterns, the California Board of Equalization for sales tax information, and the Association of Bay Area Governments for population forecasts. The analysis is straightforward and reasonable on the surface. The goal was to estimate the current demand for retail goods impacted by the JDEDZ project, using current household income and retail spending, then carry that estimate into the future to model the local retail economy through the life of the JDEDZ project. The ALH analysis, though, includes two categories of spending that we contend should have been excluded from the dataset: motor vehicle sales and eating and drinking establishments. Removing those categories reduces the predicted share of household income spent on relevant retail sectors from AHL's 25% to 19.1%. That, in turn, reduces ALH's projected population- driven increase in local retail demand through 2028 from $222.8 million to $172.2 million (Figure 6). As a result of this overstatement of current and future market demand, the ALH report thus overstates the ability of the Pleasanton retail market to absorb sales from Costco and other retailers in the JDEDZ without harmful impact. Moreover, as discussed below, holding even this lower share of income static ignores recent retail trends, compounding the overstatement through the years. Civic Economics 13